The Sovereign Credit Default Swap Market - is There Anything to Be Afraid of? A Comparison of Selected Central and Western European Economies

• Autorzy: Agata Kliber
• Języki publikacji: EN

Abstrakty

EN

The paper concentrates on the impact of sovereign CDS (sCDS) on other financial markets within a country, and tests whether the impact changed after imposing the ban on trade of the non-covered sCDS in Europe (November 2012). The European sCDS of Poland, Hungary, and the Czech Republic (emerging markets) as well as Sweden and the United Kingdom (developed markets) are analysed over the period of 2008-2013. We investigate the influence between the sCDS and the foreign exchange market, sCDS and sovereign bonds, as well as sCDS and stock exchanges. The results vary depending on the liquidity and maturity of the analysed markets, indicating that the Central European markets used to be more prone to sunspots and volatility transmission than the Western ones. The study suggests that in most cases the impact of the CDS on other financial markets diminished after November 2012 and that the markets of speculative investment grade contributed most to the ban.(original abstract)

Słowa kluczowe

EN

Financial crisis; Vector Autoregression Model (VAR); Granger casuality; Credit; Financial markets

PL

Kryzys finansowy; Model wektorowej autoregresji; Przyczynowość w sensie Grangera; Kredyt; Rynki finansowe

• Czasopismo: Argumenta Oeconomica
• Rocznik: 2019
• Numer: nr 2 (43)
• Strony: 137--167

Twórcy

autor

Agata Kliber

• Poznań University of Economics and Business, Poland

Bibliografia

• Arce, O., Mayordomo, S., Peña, J. I., Credit-risk valuation in the sovereign CDS and bonds markets: evidence from the euro area crisis, "Journal of International Money and Finance", 35, pp. 124-145, 2011.
• Augustin, P., Sovereign Credit Default Swap Premia, "Journal of Investment Management", 12(2), pp. 65-102, 2014.
• Będowska-Sójka, B., Kliber, A., Economic Situation of the Country or Risk in the World Financial Market? The Dynamics of Polish Sovereign Credit Default Swap Spreads, "Dynamic Econometric Models", 13, pp. 87-106, 2013.
• Bollerslev, T., Generalized Autoregressive Conditional Heteroskedasticity, "Journal of Eco-nometrics", 31, pp. 307-327, 1986.
• Breuer, A., Sauter, O., The impact of a sovereign default within the eurozone on the exchange rate, "Applied Economics Quarterly", 58, pp. 1-18, 2012.
• Capponi, A., Larsson, M., Will Banning Naked CDS Impact Bond Prices?, "Annals of Finance", 10 (3), pp. 481-508, 2014.
• Carr, P., Wu, L., Theory and evidence on the dynamic interactions between sovereign credit default swaps and currency options, "Journal of Banking and Finance", 31, pp. 2383-2403, 2007.
• Cheung, Y-W., Ng, L. K., A Causality-in-Variance Test and its Application to Financial Market Prices, "Journal of Econometrics", 72, pp. 33-48, 1996.
• Coronado, M., Corzom, T. M., Lazcano, L., A Case for Europe: The Relationship between Sovereign CDs and Stock Indexes, "Frontiers in Finance and Economics", 9 (2), pp. 32-63, 2012.
• Coudert, V., Gex, M., Credit Default Swap and Bond Markets: Which Leads the Other?, "Financial Stability Review, Banque de France", 14, pp. 161-167, 2010.
• Coudert, V., Gex, M., The Interactions between the Credit Default Swap and the Bond Markets in Financial Turmoil, "Review of International Economics", 21(3), pp. 492-505, 2011.
• Della Corte, P., Sarno, L., Schmeling, M., Wagner, C., Sovereign Risk and Currency Returns, Working Paper, available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_ id=2354935, 2014.
• Ergunor, E. O., On the Resolution of Financial Crises: The Swedish Experience, "Policy Discussion Papers", 21, 2007.
• Fontana, A., Scheicher, M., An Analysis of Euro-Area Sovereign CDS and their Relation with Government Bonds, "European Central Bank Working Paper" no 1271, 2010.
• Fontana, A., Scheicher, M., An analysis of euro area sovereign CDS and their relation with government bonds, "Journal of Banking and Finance", 62, pp. 126-140, 2016.
• FTSE Group FTSE 250 Index, "FTSE Factsheet", 2015.
• Hong, Y., A Test for Volatility Spillover with Application to Exchange Rates, "Journal of Econometrics", 103, pp. 183-224, 2001.
• ISDA Adverse Liquidity Effects on the EU Uncovered Sovereign CDS Ban, "ISDA Research Note", 2014.
• ISDA The Dodd-Frank Act: Five Years On, "ISDA Research Note", 2015.
• Jain, S., The Relationships between Interest Rates and Credit Spreads, "Market Realist", March 25, 2014.
• Kliber, A., Influence of the Greek Crisis on the Risk Perception of European Economies, "Central European Journal of Economic Modelling and Econometrics", 5(2), pp.125-161, 2013.
• Kliber, A., The Dynamics of Sovereign Credit Default Swaps and the Evolution of the Financial Crisis in Selected Central European Economies, "Finance a Uver", 64(4), pp. 330-350, 2014.
• Kliber, A., Impact of the ban on uncovered sCDS trade on the interdependencies between CDS market and other sectors of financial market. The case of safe and developed versus risky and developing economies, "Comparative Economic Research", 19(1), pp. 77-99, 2016.
• Kliber, A., Not As Black As It Is Painted? Influence of sCDS Market on Domestic Financial Market's Before and After the Ban on Naked sCDS Trade [in:] Jajuga, K., Orlowski, T., Staehr, K.(eds.) "Contemporary Trends and Challenges in Finance. Proceedings from the 2nd Wroclaw Conference in Finance", 2017 (in press).
• Kocsis, Z., Global, regional, and country-specific components of financial market indicators, "Acta Oeconomica", 64, pp. 81-110, 2014.
• Łęt, B., Zależności przyczynowe w sensie Grangera pomiędzy kursem terminowym ropy naftowej a wartością dolara amerykańskiego [The Granger Causality Analysis Of Crude Oil Futures Price And U.S. Dollar Value], "AUNC Ekonomia" XLIII, 2, pp. 221-231, 2012.
• Merton, R. C., On the Pricing of Corporate Debt: The Risk Structure of Interest Rates, "Journal of Finance", 29(2), pp. 449-470, 1974.
• NASDAQ OMX, Rules for the Construction and Maintenance of the OMX STOCKHOLM 30 INDEX, Version 1.4., https://indexes.nasdaqomx.com/docs/Methodology_OMXS30.pdf, 2014.
• Niedziółka, P. Kredytowe instrumenty pochodne a stabilność finansowa [Credit Derivatives and Financial Stability], Szkoła Główna Handlowa w Warszawie - Oficyna Wydawnicza, Warsaw, 2009.
• Orlowski, L. T, Tsibulina, A., Integration of Central and Eastern European and the Euro-Area Financial Markets: Repercussions from the Global Financial Crisis, "Comparative Economic Studies", 56(3), pp. 376-395, 2014.
• O'Kane, D., The Link between Eurozone Sovereign Debt and CDS Prices, "Bankers, Markets & Investors", 117, pp. 29-39, 2012.
• Osińska, M., Ekonometryczna analiza zależności przyczynowych [Econometric Analysis of Causal Relationships]. UMK Press, Toruń, 2008.
• Osińska, M., On the Interpretation of Causality in Granger's Sense, "Dynamic Econometric Models", 11, pp. 129-139, 2011.
• Platev, P., Marinova, E., The Link Between Credit Default Swaps and Stock Markets in Central and Eastern Europe, "Dialogue", 4, pp. 1-15, 2013.
• PSE The Rules for the PX-Index and PX-TR Index of the Prague stock Exchange. Version 1.3, available at: http://ftp.pse.cz/Info.bas/Eng/PX_index_rules.pdf, 2014.
• De Silva, P. P., Sovereign Credit Risk and Stock Markets-Does the Markets' Dependency Increase with Financial Distress?, "International Journal of Financial Studies", 2, pp. 145-167, 2014.
• Tarnaczi, T., Kulcsar, E., The Comparative Risk And Performance Analysis Of the Hungarian And Romanian Exchange Indices, "Annals of Faculty of Economics, University of Oradea", 1(2), pp. 451-462, 2013.
• WSE, Warsaw Stock Exchange Indices, May 2013, available at: http://www.gpw.pl/ pub/files/PDF /foldery/IndeksyGPW_0513_en.pdf, 2013.

Identyfikatory

DOI

10.15611/aoe.2019.2.06